California Organized Investment Network (COIN) Is a Collaborative Effort Between the California Department of Insurance, the Insurance Industry, Community Affordable Housing and Economic Development Organizations, and Community Advocates.

The Investigation Division investigates suspected fraud committed by insurance agents, brokers, public adjusters, bail agents, insurance companies and other individuals and entities transacting the business of insurance who perpetrate fraud against consumers.

Formation of an Underwritten Title Company

Enclosed is the application package for an organizational securities permit as part of the admissions and licensing process for a newly formed underwritten title company.

Pursuant to California Insurance Code Section 12389, every licensed underwritten title company is required to maintain both a minimum working capital of $10,000 and a minimum net worth. This minimum net worth is based on the aggregate number of documents recorded and documents filed in the offices of the county recorders in the preceding calendar year in all counties where the applicant will transact business. The amounts set forth under Section 12389(a)(2) are as follows:

Number of documents

Amount of required
minimum net worth

Less than 50,000

$75,000

50,000 to 100,000

$120,000

100,000 to 500,000

$200,000

500,000 to 1,000,000

$300,000

1,000,000 or more

$400,000

"Net worth" is defined as the excess of assets over all liabilities and required reserves. Although the Insurance Code sets forth a minimum net worth requirement, please keep in mind that these requirements are minimums. Commonly, applicants will be required to have additional net worth upon review of their plan of operation by the Department's Financial Analysis Division.

Name Approval:

At the outset, the applicant must apply for approval for the proposed name of the underwritten title company. The applicant should address a letter to the Insurance Commissioner, attention of Pamela Stefani, Name Approval Unit, at 45 Fremont Street, 21st Floor, San Francisco, CA 94105, requesting approval of the name under which the applicant intends to transact its business pursuant to the provisions of California Insurance Code Section 881. An application may list up to three names, in order of preference, and must be accompanied by a $110 filing fee payable to the California Department of Insurance. Name approval requests for domestic companies in the process of formation must be accompanied by a disclosure of the company's principals. Copies of the California Insurance Code sections relating to name approval are attached.

Next, the applicant must file articles of incorporation with the Secretary of State. Only after the corporation has been formed and duly qualified, may the applicant begin the licensing review process.

Licensing:

The procedure whereby a newly formed underwritten title company is licensed in California is fairly complex. First, the admission procedure involves an exhaustive review of the application for an organizational securities permit. The organizational securities permit is an important step in the qualification process as it allows the applicant to raise the necessary capital to commence operation. The application process requires the submission of detailed biographical information concerning the officers, directors, and key management personnel; the contemplated plan of operation of the corporation; a projection of anticipated income and disbursements for a substantial period of years; plus, other essential data.

The forms and documents enclosed within this packet are to be used in connection with the application for an organizational securities permit. When applying for an organizational securities permit, the applicant must provide the Department with the information and documentation requested in the enclosed Checklist and with all supplemental information requested during the course of review.

The applicant must also tender payment of the $3,383.00 application fee, made payable to the California Department of Insurance. An original and duplicate copy of the application, including the requested documentation, the fees, and a copy of the check(s) should be submitted to the following address:

Second, the admission procedure requires a separate application for an underwritten title company license. In addition to the documents that are required as exhibits to the organizational securities permit application, detailed business projections and financial studies must accompany the application for an underwritten title company license. The purpose of these exhibits is to project the company's anticipated income, expenses and other disbursements over a period of years. If the applicant does not already have the relevant forms for the license application, please contact the Corporate Affairs Desk, California Department of Insurance, 45 Fremont Street, 24th Floor, San Francisco, CA 94105.

You will be notified if the application is accepted for filing; and, if so, you will also be notified of the legal analyst or counsel and of the financial analyst assigned to review your application. If the application is incomplete, it will not be accepted for filing and will be returned to the applicant.

Other essential legal requirements and provisions applicable to a newly formed underwritten title company may be found in the latest edition of the California Insurance Code and in Title 10 of the California Code of Regulations, Sections 2600 through 2613.08.

A copy of the California Insurance Code may be purchased from West Publishing Company at 1-800-888-3600.

An order form for the California Code of Regulations may be obtained by writing Barclays Law Publishers, P.O. Box 3066, South San Francisco, CA 94083.